LONDON — Burberry is the latest fashion brand to be hit by the coronavirus in the all-important Chinese market.
While Burberry did not issue a sales and profit warning on Friday, it did say that retail sales have been impacted by store closures in mainland China and Hong Kong.
Currently 24 of its 64 stores in mainland China are closed, with remaining stores operating with reduced hours “and seeing significant footfall declines.”
The company added that the spending patterns of Chinese customers in Europe and other tourist destinations have been less impacted to date, “but given widening travel restrictions, we anticipate these to worsen over the coming weeks.”
The news sent shares down 1.43 percent to 19.88 pounds in late-morning trading on the London Stock Exchange. The share price recovered during the course of the day, closing down 0.1 percent at 20.15 pounds.
Earlier this week, Capri Holdings Ltd., parent of Michael Kors, Versace and Jimmy Choo, warned that the ongoing coronavirus crisis will have a severe impact on its results in the next quarter — and potentially even a greater one depending on how long the health emergency lasts. The company said it expects the epidemic to reduce revenues by about $100 million in the fourth quarter.
Burberry did not comment on whether or not it was still planning to stage its fall 2020 fashion show in Shanghai in April. Spend by Chinese consumers globally generates 40 percent of Burberry’s sales.
“The outbreak of the coronavirus in mainland China is having a material negative effect on luxury demand. While we cannot currently predict how long this situation will last, we remain confident in our strategy,” said Marco Gobbetti, chief executive officer.
“In the meantime, we are taking mitigating actions and every precaution to help ensure the safety and well-being of our employees. We are extremely grateful for the incredible effort of our teams and our immediate thoughts are with the people directly impacted by this global health emergency,” he added.
The company said its most recent guidance for the fiscal year ended March 2020 predates the impact of the coronavirus outbreak and the company wanted to update the market.
Burberry clarified that the “mitigating actions” it is taking will have a “limited” impact, given the proximity to its fiscal year-end on March 31, when it will provide a retail trading update.
“We also intend to continue our key growth initiatives in preparation for a recovery in luxury demand,” it said. “We remain confident in our strategy and are very pleased with the positive response to our brand repositioning and new product. We will continue to focus on newness and fashion, and on inspiring and engaging our customers globally. We fully support the efforts the Chinese government is taking to contain the virus and we are working in close conjunction with local authorities and partners.”
Burberry has already been suffering in Hong Kong: Last month, in its third-quarter trading update, it said Hong Kong, which generated 8 percent of Burberry’s sales last year, contributed just 4 percent in the third quarter due to a decline in mainland Chinese tourists and temporary store closures from the ongoing protests.
At the time, despite the falloff in Hong Kong and the rise of the coronavirus in mainland China, Burberry had raised its revenue guidance, saying it expected full-year revenues to grow by a low single-digit percentage at constant exchange, compared to previous guidance of “broadly stable.”
It expected adjusted operating margin to remain broadly stable at constant exchange, despite the impact of disruptions in Hong Kong. For the full fiscal year, cumulative cost savings are set to be 125 million pounds, ahead of the 120 million pounds originally forecast.